In recent years, the Supply and Demand zone trading strategy has become popular with traders. The idea behind this method is that the trader will follow the big actions of the Big Boys in the supply and demand zones of the market.
This is the first article in the series of FIXED TIME trading strategy with the Supply and Demand zones in Olymp Trade. Stay tuned to see if this is the effective trading strategy you are looking for.
What is Supply and Demand trading?
Supply and Demand trading is a method based on the idea of finding the point at which the market will decrease or increase sharply. These zones will be marked as the Supply and Demand.
The Supply zone is where the price drops sharply. In contrast, the Demand zone is where the price rises sharply. The key of this method is to find the standard Supply and Demand zones to be able to trade like a Bigboy (funds, banks…). If you can do that, then your order will be much safer than when trading with the position as a retail trader.
What is the Supply Zone?
When supply exceeds demand, there is a movement in price. The price goes down because an amount of the good is produced too much and the market has no demand for this quantity. There are more sell orders than buy ones (imbalance between sellers and buyers).
The price will struggle before falling completely, forming an area called the Supply zone. You will find opportunities to sell in the future when the price returns to this supply zone.
Reason: When there is a strong imbalance, it also means that there is an “unfilled” sell order in this supply zone. Then, if the price turns back, these “congested” orders will be liquidated. Thus, the price will fall again.
What is the Demand Zone?
When demand exceeds supply, there is a shift in price. Prices are pushed up due to increased demand for goods and lack of supply. Prices go up because there are more buyers than sellers (imbalance). When the price has a pullback before rising, we call it the demand zone. You can look to buy in the future if the price retraces to this demand zone.
Reason: When there is a strong imbalance, it also means that there is an “unfilled” buy order in the demand zone. When the price hits the demand zone, these orders will be executed, pushing the price up again.
How to identify the basic Supply and Demand zones
In FIXED TIME trading in Olymp Trade, you can completely use these Supply and Demand zones to enter trades with high accuracy. In the rest of the article, I will show you how to identify the Supply and Demand zones. This is an important skill you need to master before you can trade effectively with this strategy.
How to identify the Supply zone
There are 2 common types of supply zone: (1) Reversal and (2) Continuation.
(1) Reversal pattern: Rally – Base – Drop.
The price moves sideways after a period of uptrend, creating a series of candlesticks called the Base. Then it falls sharply with a long body candlestick. This base is the reversal Supply zone.
The 6 sideways candlesticks in the image above are the Base. When the gold price falls sharply that creates a red candlestick with a long body, this Base now becomes the reversal Supply zone.
(2) Continuation pattern: Drop – Base – Drop
The price falls and creates sideways candlesticks, then continues to plummet. The horizontal price zone (Base) in this process will be the Supply zone.
You can see the example as shown below.
How to identify a Demand zone
Similar to the Supply, we will focus on the Base and the series of sudden strong bullish candlesticks.
(1) Reversal pattern: Drop – Base – Rally
When the market bounces and creates a long green candlestick, the Base will be the Demand zone.
(2) Continuation pattern: Rally – Base – Rally
You can see the practical example as shown below.
This article is in a series to guide you to trade FIXED TIME in Olymp Trade with the Supply Demand zone. Try this new way of trading by testing it on the Demo account and identify the Supply and Demand zones on the candlestick chart.
In the next article, I will show you how to place FIXED TIME orders correctly with these zones. Goodbye and see you again.
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